Delhi Development Authority vs A S Sachdeva & Sons
2010 Latest Caselaw 5203 Del

*                  IN THE HIGH COURT OF DELHI AT NEW DELHI

+                              FAO.No.179/1995

%                                                 Reserved On:08.11.2010
                                                Pronounced On:16.11.2010

DELHI DEVELOPMENT AUTHORITY                                    .... Petitioner
               Through: Ms. Renuka Arora, Adv.

                                   Versus

M/S. A.S. SACHDEVA & SONS                         .... Respondent
                 Through: Mr. Honey Taneja, Adv. for Mr. Raman
                          Kapur, Adv.

CORAM:
HON'BLE MR. JUSTICE MOOL CHAND GARG

1.     Whether reporters of Local papers may be                   No
       allowed to see the judgment?
2.     To be referred to the reporter or not?                     No
3.     Whether the judgment should be reported in                 No
       the Digest?

:      MOOL CHAND GARG,J.

1. This appeal arises out of a judgment and order of the learned ADJ whereby the learned ADJ made the award dated 12.07.1993 published by the sole Arbitrator a rule of the Court. By the aforesaid award, the sole Arbitrator allowed the claim of the respondent regarding refund of security deposit to the tune of `51,503: as also the claim of `45,000/- payable to the respondent as per the final bill. The Arbitrator also observed that the reduction item statement issue of the Superintending Engineer was also subject to adjudication by the Arbitrator in view of Clause 14 of the agreement and the statement made by the Superintending Engineer being not a correct statement rejected the claim of the appellant for making certain recoveries from the amount payable to the respondent.

2. Briefly stating the facts giving rise to the filing of this appeal are that a petition was filed by the respondent under Section 14 and 17 of the Arbitration Act, 1940 (for short „the Act‟) praying for calling the award published by the Arbitrator on 12.07.1993 on Court file and to

make it as rule of the Court. The award was delivered by the Arbitrator in a dispute which arose between the parties in relation to the work awarded to the respondent for construction of „Development of Rohini Project Phase-II Section IX, XIII, XIV (Part), DV, XVI, XVIII, XIX and Commercial (Public - Semi Public Area) Sh.: Road Work in Section IX and XII Part I.

3. The Contract awarded to the respondent contained arbitration clause providing for adjudication of the disputes to be adjudicated by an Arbitrator to be appointed by the appellant. The appellant appointed Sh. N. Lakshmiah as the sole arbitrator who after entering into the reference made the award in question.

4. Objections to the award was filed only by the appellant under Section 30 of the Arbitration Act stating that the Arbitrator misconducted himself in awarding claims of `51,503/- to the claimant towards refund of security deposit after ignoring the submissions of the appellant that work was delayed by the claimant and that it was not up to the mark. It was also pleaded that the reduction item statement (RIS) was issued by the Superintending Engineer whose decision was final as he was the competent authority as per clause 25-B of the agreement. It was also pleaded that the Arbitrator also ignored that the respondent was liable to pay compensation for delay in completion of the work as per the terms of the agreement and in this regard also, the decision of the Superintending Engineer regarding the quantity as well as the rate for substandard work was final and not open to arbitration as per clause 25-B of the agreement. It was also pleaded that awarding claim of `45,000/- to the respondent towards payment of final bill was also not justifiable.

5. Objections were contested by the respondent. According to the respondent the Arbitrator has given a reasoned award and the same was liable to be made rule of the Court.

6. On the pleadings of the parties, the learned ADJ framed the following issues:-

1. Whether reply to the objections has been properly signed and verified?

2. Whether the award is liable to be set aside on the grounds mentioned in the objections?

3. Relief:

7. While deciding issue No.2 taking note of the various judgments placed on record by the parties, including the case of Rattan Singh & Sons Pvt. Ltd. Vs. Delhi Development Authority 1993 (1) Arbitration Law Reporter 56 and in the case of Dewan Suraj Parkash Chopra & Sons Vs. DDA & Anr. 1991 (1) Arbitration Law Reporter 366 which deal with the jurisdiction of the Arbitrator, the learned ADJ held that in terms of clause 14 of the agreement, the issue of reduction in the item rate was also subject to adjudication by arbitration. As regards the two other claims, namely, refund of security amount and non-payment of `45,000/- towards final bill, the learned ADJ made the following observations:

"12. Even otherwise I may mentioned that the ld. Arbitrator has also considered this aspect and has found that since principle of natural justice has not been applied upon, so he has a discretion to go into the question of quantum of reduction item statement. To my mind, ld. Arbitrator has rightly gone into this question. I may further mentioned that it is only clause 2 and 3 which provide that decision of the Superintending Engineer is final but clause 2 provides for execution of the contract within the stipulated period and empowers the Superintending Engineer to levy compensation in case there is delay in completion of the contract during the stipulated period. Clause 3 empowers the Engineer Incharge to determine the contract on certain conditions such as delay or inferior workmanship or breach of contract etc., and in that event also, the decision of the Engineer- Incharge is stated to be final and conclusive. It is clause 14 which has a sub-title „Action & Compensation Payable in case of bad work.‟ In this case, I find that for claiming compensation for bad work, no finality is attached and this clause 14 of the agreement can be rightly arbitrated upon by the arbitrator. Same clause was subject matter of interpretation before Hon‟ble High Court of Delhi in the case of Dewan Suraj Parkash Vs. DDA - as referred to above, wherein it was held that:

"Nowhere it is stated in clause 14 that the decision of Engineer-in-charge in respect of the amount incurred in rectifying the defects left by the Contractor shall be final. Moreover, it does not give any discretion to the hierarchy of

officers to reduce the compensation if proper explanation is given by the contractor. Therefore, in case there are disputes regarding levy of compensation, the same shall have to be resolved by the arbitrator under Clause 25. The arbitrator has given a number of reasons on account of which he held that the levy of compensation was unjustified as the delay had been caused by the deft. itself. The court is not going to sit in appeal over the reasons given by the arbitrator."

In view of the above discussion, I find that the ld. Arbitrator has no misconducted himself in awarding the refund of security deposit to the tune of `51,503/- under claim No.1 and in awarding `45,000/- for Reduction Rates/Items under claim No.2 since the arbitrator was competent enough to arbitrate such like disputes"

8. It may be observed here that firstly, there was a dispute with regard to refund of security sought to be withheld by the appellant merely because they were claiming a sum of `7520.69 on account of various recoveries without finalizing the final bill. Even though the issue was pending for a long time. The claim of `45,000/- was based upon the final bill raised by the respondent which was disputed on account of certain reductions to be made on the basis of recommendations of the Superintending Engineer which as per the award were unjustifiably reduced. A perusal of the award given by the Arbitrator shows that the Arbitrator has discussed each and every aspect of the matter in detail and has given reasons for coming to his conclusions.

9. We may also take note of some of the judgments wherein Hon‟ble Supreme Court and this Court has defined as to what is" misconduct" and " legal misconduct" on the part of the Arbitrator.

Union of India v. Jain Associates, (1994) 4 SCC 665, at page 671 :

word „misconduct‟ in Section 30(a) does not necessarily comprehend or include misconduct of fraudulent or improper conduct or moral lapse but does comprehend and include actions on the part of the arbitrator, which on the face of the award, are opposed to all rational and reasonable principles resulting in excessive award or unjust result or the like circumstances which tend to show non-application of the mind to the material facts placed before the arbitrator or umpire. In truth it points to fact that the arbitrator or

umpire had not applied his mind and not adjudicated upon the matter, although the award professes to determine them. Such situation would amount to misconduct. In other words, if the arbitrator or umpire is found to have not applied his mind to the matters in controversy and yet, has adjudicated upon those matters in law, there can be no adjudication made on them. The arbitrator/umpire may not be guilty of any act which can possibly be construed as indicative of partiality or unfairness. Misconduct is often used, in a technical sense denoting irregularity and not guilt of any moral turpitude, that is, in the sense of non-application of the mind to the relevant aspects of the dispute in its adjudication

Vikas Constration Co. v. Union of India, ILR (1987) 1 Del 272, at page 272 :

What is a legal misconduct has to be considered on the facts of each case and where the arbitrators hold talks with the counsel for the plaintiff on the back of the defendant, the arbitrators would be deemed to have misconducted themselves. A positive act of the arbitrators to communicate with the other side a conduct would tantamount to violation of the principles of natural justice and would materially affect the award and would be a legal misconduct of arbitrators. Likewise when an award can be said to be improperly procured is again a question of fact in each case. If the arbitrators solicit and actually take the assistance of the plaintiff in the matter of getting their seats reserved by a train and for their return journey by air, it can safely be concluded that the arbitrators have misconducted themselves and the award would be deemed to have been improperly procured. It would not be accepted that such a conduct of the arbitrators was a mere indiscretion and was not a form of procurement. Ceaser‟s wife should be above suspicion and so should be the arbitrators. It would be imperative for the arbitrators that they scrupulously avoid any course of action which would even remotely suggest to bear the complexion of their having put themselves into a position where it could be said against them that they had received a pecuniary inducement which might have had some effect on their determination of the matter admitted to their arbitration. On the existence of this situation the arbitrators would be deemed to have misconducted themselves and the award would be deemed to have been improperly procured as in the instant case.

10. Having gone through the award which explains in detail as to how the Arbitrator has adjudicated all the claims i.e. the claim with regard to refund of security; payment of final bill and not accepting reduction of various items as opined by the Superintending Engineer, I find no reasons to disturb the findings returned by the learned ADJ. Once a

reasoned award has been given after discussing each and every aspect of the matter in accordance with the terms of the agreement, the plea taken by the appellant that the Arbitrator has misconducted the proceedings is not sustainable inasmuch as nothing has been brought to the notice of this Court that Arbitrator while adjudicating the disputes either ignored the material available on record or interpreted the law erroneously.

11. In these circumstances, the learned ADJ rightly concluded that there was nothing on record to suggest that the Arbitrator exceeded its jurisdiction in any manner and rightly made the same rule of the Court. The learned ADJ taking into consideration that this being a commercial transaction also granted interest @ 12% per annum on the awarded amount from the date of decree.

12. Accordingly, the appeal is dismissed with no order as to costs

13. TCR be sent back forthwith.

MOOL CHAND GARG,J NOVEMBER 16, 2010 'anb'